Interviews

Fmr. CBO Director on Obama's 2011 Budget

This is a rush transcript from "Your World With Neil Cavuto," February 1, 2010. This copy may not be in its final form and may be updated.

NEIL CAVUTO, HOST: Ready, set, hike.

Welcome, everybody. I’m Neil Cavuto.

And forget the Super Bowl this weekend, the president going long, really long, today, offering a budget that is super big, really big. We are talking record super budget bowl big, nearly $4 trillion in spending for one year, next year, likely a $1.6 trillion deficit this year, but all supposedly getting better in future years, thanks to combined deficit cuts totaling more than a trillion bucks over 10 years.

Here’s the problem, a lot more taxing than cutting to get to those better numbers.

To former CBO Director Douglas Holtz-Eakin on what the heck is going on here.

Douglas, it is staggering that a lot of these savings over the years, the future years, are borne by the super rich, who are going to be paying a super tax bill. That’s 90 percent of how you get there. What do you make of that?

DOUGLAS HOLTZ-EAKIN, FORMER CONGRESSIONAL BUDGET OFFICE DIRECTOR: Well, it’s a big-tax budget. You can see it in two places.

The first is that, if you look at the year 2020, 10 years out, we’re raising, in this budget, 19.6 percent of national income in taxes for the federal government. The historic norm is 18.2 percent. So, that is an extra 300-odd billion dollars every year that’s built into this budget. And if you look at the tables included in the budget themselves and just start adding up, tax increases, tax increases, subtract the tax cuts they want to advertise, you’ve got $1.1 to $1.2 trillion in new taxes over the 10 years that this budget covers.

CAVUTO: Now, they always counter by saying, look, we’re just focusing on the $250,000-and-over crowd. Obviously, when you tax them, the numbers are big. So, Douglas’s math kind of skews that point.

But, to your point, just raising the income tax rates on the top two levels, that’s going to get $678 billion, the Treasury hopes, over the next 10 years. Taking away a lot of their benefits to charitable deductions, mortgage deductions, or eliminating or cutting them down is another close to $300 billion, bank fees, another $90 billion.

There you go. Those are your savings.

HOLTZ-EAKIN: This is not a recipe for faster economic growth, which I think everyone agrees we need. It is not a recipe for even solving our budget problems.

So, you have to ask the question, why do this if, even after you do it, you’re running a trillion-dollar deficit 10 years from now and you’re impairing economic performance every year in between?

CAVUTO: Not that I would have been happy with the tax hikes on any group of people, rich, in between, anyone, but I might have been more OK with it, Douglas, if there was serious effort to cut spending. And this relative chump change, from $220 billion to $250 billion over 10 years, about $25 billion per year in multi-trillion dollar budgets each year, doesn’t seem like it’s very serious.

HOLTZ-EAKIN: I don’t think this is a serious effort to come to grips with the spending problem in the federal budget at all.

They’re touting the freeze and saying, if we get this freeze for 10 years, it would add up to $250 billion. There’s no guarantee you will get that. It’s done each year. And they want to point to the health care bills and say, oh, we will save $150 billion from those. I think that’s been widely discredited.

And, again, if you just go to their tables and add up the cuts in — quote — mandatory spending, the things that stick, it is under $50 billion. I calculated $28 billion in real spending reductions. That’s not enough to make a dent in our problem.

CAVUTO: But you know what? The title seems more realistic this year. Last year, it was a new era of responsibility. This year, it’s just budget. So, that’s not too bad, is it?

HOLTZ-EAKIN: Well, I think this is indicative of what I think is the problem. The words are what get the attention, but the substance is not there.

CAVUTO: All right, Douglas, very good seeing you again. Thank you very much.

HOLTZ-EAKIN: Thank you, Neil.

CAVUTO: A man who used to run the Congressional Budget Office, so he knows a thing or two about numbers crunched, fictionally or not.

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